In: Accounting
Please explain how to do the below problems answers are given at the end.
The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.
What is the total annual cost of ordering and holding the product? This calculation should be in dollars, so your answer should have two (2) decimal places.
This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.
Answer:
The correct answer is: 620.72
Question text
The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.
What is the length of time in days between orders of this item?
This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.
Answer:
Example 4. Time = (working days per year)/(# of orders per year)
The correct answer is: 34.82
Question text
The Larkspur Furniture Company's chair manufacturing requires multiple shades of wood stain. The most popular stain color is "Warm Oak”. The company's production operation uses 560 cases per year of this stain. The ordering cost is $43 per order. The company estimates the holding costs at $8 per case per year. The lead time to receive a shipment from the supplier is 5 days. The company operates 250 days per year.
What is the reorder point? Assume there is no safety stock.
This problem does not require you to enter the units of measure for your answers. Don't type anything in the response box below except the final calculation result.
Answer:
The correct answer is: 12
What is the total annual cost of ordering and holding the product? | ||||||
Calculate EOQ ? | ||||||
Production | 560 Cases per year | |||||
Ordering cost | $43 | Per order | ||||
Holding cost | $8 | Per order | ||||
Company operates | 250 days in a Year | |||||
Lead time for Shipment | 5 days | |||||
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EOQ | 2* Demand * Ordering Cost/ Holding Cost | |||||
6020 | ||||||
Economic Order Quantity | 77.6 | |||||
Total Cost = | Annual Holding Cost + Annual ordering Cost | |||||
Annual Holding Cost | = EOQ/2 * Holding Cost per Case | |||||
$ 310.35 | (a) | |||||
Annual ordering Cost | = Total Production/ EOQ * Ordering Cost per Case | |||||
$ 310.35 | (b) | |||||
Total Cost = | $ 620.71 | (a) + (b) |
What is the length of time in days between orders of this item? | |||
Length of time | = EOQ /Total Production* Number of days of operation | ||
EOQ | 77.6 | As calculated above | |
Total production | 560 cases per year | ||
Number of days company operates | 250 days | ||
Length of time | 34.64 |
What is the reorder point? | ||
Reorder point | =Average unit daily production/ Lead time | |
Total production | 560 cases per year | |
Number of days company operates | 250 days | |
Average Unit daily production | 2.24 | |
Lead time | 5 days | |
Reorder point | 11.25 | |